Whether you realize it or not, noticing early warning signs of financial distress can make or break your future. I've been in your shoes, and I know what it feels like.
It's daunting to face the truth: the fact that you're on the brink of financial disaster. You've worked so hard to maintain your credit score, tried to pay off your debts as fast as possible, but everything seems to be falling apart.
The five early warning signs I'm about to mention are not compiled from financial experts or personal finance books, but instead my own personal experience dealing with credit card debt.
• Not checking your statements-- As soon as you get your monthly statements, you throw them in the pile of mail because you're afraid of checking your balances. You wait until the very last-minute to check the due date or login to your online banking to pay your bill. I don't blame you. As soon as I realized exactly how much credit card debt I had, it turned my day upside down. We all know that your debt isn't going to disappear overnight, so the sooner you face the truth, the sooner it'll be over!
• Recycling Available Credit-- Admittedly, this is something I was guilty of. As soon you pay your monthly minimum payment, you'll immediately notice that you have a little more available credit at your disposable. The problem with establishing a high credit limit to begin with is that it creates a false sense of "free money," also known as, "spend now and pay later." If you're reusing the available credit every month for your daily expenses, you're trapped in a never-ending spiral of debt.
• Waiting for the "big fix"-- Have you ever told yourself that you would pay off a huge chunk of your credit card debt once you get your annual bonus? If you're struggling with credit card debt, I'm sure you realized how unpredictable the future is. After all, when you first got your credit card, you would have never thought in a million years that you would be drowning in debt right? There's no telling what the future holds. The best course of action is the take immediate steps today to pay down your debts.
• Looking for balance transfers-- This might be a little controversial in the sense that balance transfers can actually help you pay down your debts. In most cases, you're probably looking for a balance transfer for the comfort of having one monthly payment or to take advantage of the "introductory teaser rate." I like to see this as a temporary band-aid to the problem. It'll stop the bleeding for the moment, but you haven't found a permanent solution.
• Only paying minimum payments-- Lastly and certainly not least, it's no rocket science that paying only the minimum payments can be disastrous. Not only will you end up paying thousands of dollars in interest, but you'll simply never get out of debt.
So What Now?
Don't beat yourself up if you fall into any of these categories. It happens to the best of us. It's nothing to be embarrassed about; you're in the same boat as millions of Americans. The first step is to face the truth that you need immediate help. The longer you wait, the worse it becomes.
The first step is to contact your creditors and ask for any internal hardship programs to help you manage your payments. Most creditors, believe it or not, want to help you get out of debt. After all, it does them no good if you end up filing for bankruptcy. If your creditors aren't willing to work with you, explore all your debt relief options to see if it's a viable solution.
This isn't a time to panic. Take a step back, organize your finances, and take action today.